New Year, Same Old Debt-Panic Feedback Loop
It appears that Nikki Haley will be on everyone's minds for at least a little bit longer, as she has become the clear challenger (though still a longshot) in the Republican presidential primaries. I have written about Haley before (most recently here), and I plan to do so again soon, arguing that she would not save us from a MAGA-style dictatorship -- indeed, that she would not even try to do so. We knew all of that even before she revealed herself as a Civil War revisionist, and now that she is promising that she would pardon Donald Trump, it is even more obvious that she is in no way the reasonable adult in any room.
All of that, however, is for another day. Today's column begins with Haley's decision to wade into the dreariness of debt panic, which differentiates her in no way from anyone else in US politics, from the center-left rightward. She just happens to have provided the motivating quotation for this column, where her tepid attempts to "take on Trump" included this, as reported by ABC News:
There are things I agree with the president on. I had a good working relationship with him. There are things I don't agree. I don't agree with the fact that, yes, we had a good economy while he was there but he put us $8 trillion in debt that our kids are never going to forgive us for.
Immediately after that quotation, the ABC reporters offered this helpful parenthetical. "(Tax cuts and the federal government's COVID-19 response were large factors in that increase.)" Both parts of that clarification are noteworthy. First, Haley surely would never come out against the 2017 tax bill, as horrible as it was -- in fact, precisely because it was so horrible. Second, the US economy has performed much better than other countries throughout the Covid and post-Covid years precisely because we ran up our debt. So that was an unexpected moment of helpful reporting from ABC. Unfortunately, it is all too rare in media coverage of the federal debt.
Note that Haley's comments, beyond her continued insistence on treating Trump with kid gloves and trying not to offend his grievance-fueled base, invoked that most standard of tropes in the debt-panic universe: Won't somebody think about the children! If she thinks that we should beg our kids' forgiveness for our Covid-responsive fiscal policy, she has it backwards. The ungrateful little snots should be thanking us! Seriously, this is the same category of thinking that looks at the spike in US debt in the 1940's and says, "Look at that irresponsible borrowing!" What did we borrow and spend that money to do? Let me think. Oh right, to defeat fascism -- or at least to hold it off for about eighty years. Money well borrowed and spent, no?
So even though there are things unique to Haley that are worth picking up in future columns, here she is merely a stand-in for every mindless politician who robotically intones: debt bad, future generations harmed, must balance budget (without ever saying how). And as the title of this column indicates, the debt-is-always-bad mindset is reinforced by a feedback loop, one that includes a lot of people who should know better.
The best recent example of this comes from NPR, which is hardly a right-wing redoubt -- but not the nest of commies that conservatives see in their nightmares, either. A friend forwarded to me a link to a five-minute segment that ran yesterday, noting that the reporter is "a usually very good journalist." Because I never listen to NPR, I will take that on faith. And even though I am about to criticize her rather harshly, this in no way distinguishes her from anyone else in US public life who wants to hide behind safe, sober-sounding inanity about the federal debt. She might well be a very good journalist. Anti-debt nonsense is so pervasive that it is impossible to judge someone negatively for repeating it. (For that very reason, however, it is very fair to judge someone positively when they break with the conventional wisdom. Would that that had been the case here.)
We can start with the title of NPR's segment: "The national debt tops $34 trillion — a record high. How worried should we be?" Frequent readers of Dorf on Law might recall how much fun I have had mocking that framing of the rise in federal debt. How much fun?
This past September, I wrote: "Breaking News on the Federal Debt: 33 is a Bigger Number than Any Smaller Number!!" There, I noted that the in-house debt-panic team at The New York Times had just published a content-free piece under the headline: "U.S. National Debt Tops $33 Trillion for First Time." I further noted that I had eleven months earlier mocked (in a two-part Verdict column and a Dorf on Law column) a similar Times piece headlined: "U.S. National Debt Tops $31 Trillion for First Time." They could not even be bothered to come up with different wording for their two headlines.
NPR at least phrased it slightly differently, but the idea was the same: US federal debt hits a new round-ish number that has absolutely no economic significance, and uninformed journalists then say, "Wow, that's a big number!" But the "record high" or "for the first time" phrasing is as insipid as ever. The US economy continues to grow to its highest levels ever, and debt should do the same. It reminds me of a time in the 1970's when conservative economic semi-deity Milton Friedman was asked about the post-war record-high unemployment rate at the time, and he responded by saying that the US had more jobs than ever. Well yes, because the economy was larger than ever, and the population was higher than ever, there would be more jobs than ever. That does not change the fact that the unemployment rate was high -- and it of course ignored the fact that the raw number of unemployed people was also at a record post-Great Depression high.
Again, what in the world is newsworthy about the debt steadily increasing through integers of trillions of dollars? There is nothing new or interesting about it, but it does give such reporters the opportunity to sound awed by the sheer size -- the bigitude, if you will -- of the number of dollars. The NPR reporter thus begins the segment with this cold open: "The national debt now tops thirty-four trrrillion dollars ... a record high." Bigitude! To her minimal credit, she then adds: "So how worried should we be? That seems to depend on which economist you ask." It would have been more honest to ask, "How should we feel about this? Encouraged? Worried? Indifferent?" Even so, at least she admits that there might be a difference of opinion, which is more than we usually see.
The deeper problem is that the economist that the NPR reporter asked is a genuine outlier, yet listeners are never told as much. We are led to believe that this is just "an economist" who used to work with Senator Bernie Sanders and who now teaches at a research university that most people know little to nothing about. How much of an outlier is this expert witness? There is a small group of economists on the left who fervently believe in what they have labeled MMT (Modern Monetary Theory). Professor Dorf and I (in a co-authored piece here) have critiqued that much-mocked theory, and I have written separately about it multiple times (most recently here, with links therein to earlier critiques).
To be clear, MMT people have perfectly sensible views on some things; but when they do, their analysis is no different from textbook Keynesianism (which is the macroeconomic approach to which I subscribe). What makes MMT different is not worth going into here, but the upshot of it is that even though they are right to dismiss the importance of debt accumulation, their reasons either make no sense or have no logical limits.
People like me point out, as the guest on NPR did, that the government's budget is not like a family's and that the government can create the money that it needs to pay its bills. The guest economist also correctly responded to the NPR reporter's question about ratings agencies downgrading US debt, pointing out that the agencies themselves announced that they were worried about Republicans' threats to use the debt ceiling to force a default, not the level or growth of debt itself.
In those ways, then, it was a breath of fresh air (which I think is an NPR-related play on words, but again, I wouldn't know) that the reporter chose to interview an outlier who would debunk the conventional wisdom about government debt being bad bad bad. One might even suppose/hope that the reporter was playing devil's advocate in asking such questions, although her moralistic tone and unmistakable presumption that this all is something bad make me skeptical.
In any event, the interviewee's explanation for why the debt is not a problem included some genuinely head-scratching word play, saying that it is not debt but "savings."
[O]ver the arc of U.S. history, the U.S. government typically spends on an annual basis more dollars into the economy than it taxes away from us. And so it's adding dollars, and over time, we keep track of how many dollars have been added. And what that 34 trillion is telling you is that over the long sweep of history, the U.S. government has put that many dollars into our hands without taxing them away. So what it is is it's our after-tax savings that's being reported.
Again, almost all economists -- even those of us who agree on most policy issues with MMTers -- think that is nonsense. MMTers are nothing if not argumentative, but even those of us who would be inclined to be very sympathetic have never succeeded in getting them to do anything more than what Paul Krugman refers to as the MMT version of "Calvin ball," a game where the people who are losing change the game whenever they need to do so.
Even on its own terms, it makes no sense to say that "we" have thirty-four trillion dollars that we otherwise would not have if the govenrment had not run up that much total debt over time "without taxing them away." Had the government used taxes rather than debt to finance public investment and emergency responses, we would have had a weaker economy and longer/deeper recessions, but treating the total debt amount as a specific dollar amount of savings is, again, weird.
The reporter also never posed the most important devil's-advocate question, which is whether the creation of money will cause inflation. I suspect that the interviewee would have gotten this one right (without wandering off into word salad), which is that even the US's most aggressive episodes of debt creation have never come close to setting off a debt-fueled inflationary spiral. Instead, the reporter invoked Greece of all things (Greece, Greece I tell you!) and then cut off the interviewee's completely correct answer that Greece in fact proves the point that those of us who are not panicking about debt make, which is that Greece has tied itself to the euro and thus cannot do what the US (and the UK and Japan) can do, which is to issue debt in one's own currency.
All in all, this is all more dispiriting than alarming. The top non-Trump Republican presidential candidate invokes standard content-free anti-debt propaganda, and NPR touts "a record high" amount of federal debt while botching an interview with someone who was not bad but still wasted a lot of time on nonsense. What Haley and her party are doing on non-economic issues is what we truly need to worry about, however, so I am more than content simply to roll my eyes and move on.